financial services quarterly update - deloitte ushopes of lighter regulation, higher growth, and...

Financial Services Quarterly Update

Deloitte Corporate Finance LLC | www.investmentbanking.deloitte.com

Q4 2016

www.investmentbanking.deloitte.com |

Quarterly Update | Q4 2016 | Financial Services

Financial Services Trends In This Update

• Financial Services Trends• Economic Outlook• Industry Analysis• Select M&A Transactions• Appendix

This update will focus on news and trends in the following areas:

• U.S. Banks • U.S. Specialty Finance

Who We Are

Deloitte Corporate Finance LLC is a leading global middle market M&A adviser. The firm’s professionals have extensive knowledge and years of experience in the Financial Services space.

Contacts

Charlie WelchManaging [email protected]+1 (704) 731-7201

Phil ColacoManaging [email protected]+1 (704) 333-0533

In the News

October 3, 20165 – Janus Capital Group Inc. announced that it will be acquired by British rival, Henderson Group PLC. The trans-Atlantic deal will create a global investment firm with over $320.0 billion of assets under management. The new company, based in London, will be called Janus Henderson Global Investors PLC. The merger comes at a time in which active money managers are facing pressure from competitors who offer increasingly popular and low-cost investment strategies.

December 14, 20166 – Simmons First National Corporation announced a $564.4 million stock acquisition of Oklahoma-based Southwest Bancorp, Inc. Southwest has 31 branches and $2.5 billion in assets. The proposed acquisition will allow Simmons to secure a foothold in Oklahoma, Colorado, Texas, and Kansas. Southwest will continue to operate as a separate entity until it is merged into Simmons Bank.

Impact of Technology Uncertain3

Index Funds Remain Popular4

Election Results Spur Bank Growth1

Industry experts have mixed opinions about the impact of technology in the financial services industry. While McKinsey & Co. predicted in a report that increasing automation could reduce bank profits by $45 billion by 2020, a report by Accenture predicted that utilizing the block chain could save banks roughly $8 billion a year.

The new Trump Administration has brought hopes of lighter regulation, higher growth, and lower taxes, which contributed to boosting bank profitability and stock prices in Q4 2016. The net income of the top 20 U.S. Banks grew 3.7% from 2015 to 2016. In contrast, uncertainty and negative interest rates in Europe have contributed to sluggish European bank growth.

Passive investment funds that track underlying indexes continue to be in high demand, partly because they are viewed as less reactive to market volatility. As a reaction to investor demand, portfolio managers are likely to continue adding index share classes and index-tracking ETFs in 2017, even if the product demonstrate it is less profitable than others.

Data-Quality Expectations Continue to Rise2

Regulators are making it increasingly clear that banking organizations are expected to have capabilities to access and provide high-quality data. Depending on the institution, regulators are focusing on data in areas such as capital planning, liquidity management and risk-measurement techniques.



4.0

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8.0

10.0

12.0

14.0

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Per

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Tier 1 Common Capital Risk-Based Ratio Return on Average Equity

Macroeconomic Outlook

Whole Bank M&A Volume5 Annual Transaction Price / TBV6

Banking Sector Outlook

U.S. Treasury Yield Curve(Nominal vs. Real)2

U.S. Gross Domestic Product1

Commercial Bank Capital Ratios & ROAE3 Number of U.S. Bank Branches4

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Inte

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188193

184179

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106

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91

108 108 111

133

50

75

100

125

150

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ian

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$5.0

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$ i

n T

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GDP ($ in Trillions) YoY % Growth (Adj. for Inflation)

266 272 272 270290

172

108

175147

229242

309293

234

0

50

100

150

200

250

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350

Nu

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(10.0%)

0.0%

10.0%

20.0%

30.0%

40.0%

SNL U.S. Bank S&P 500 NASDAQ

Footnotes:i. As of December 31, 2016.ii. As of the most recently available quarter.

Banking Sector Breakdown & Trading Statistics1

Public Comparables Three-Year Stock Market Performance2

SNL U.S. Bank 22.2%S&P 500 Index 35.4%NASDAQ Composite Index 29.9%

Quarterlyii

Sector Number of Companies

Price Change

Price /Book

Return onAssets

Net InterestMargin

Return onEquity

Efficiency Ratio

TE /TA

NPA /TA

Banks (<$1B Assets) 518 14.9 % 94.4 % 0.81 % 3.6 % 7.7 % 72.1 % 9.9 % 1.1 %

Banks ($1B-$10B Assets) 254 39.8 128.5 0.99 3.6 9.1 60.6 9.1 0.7

Banks ($10B-$50B Assets) 43 42.7 121.4 1.01 3.3 8.4 60.2 8.8 0.8

Banks (>$50B Assets) 21 31.9 114.8 1.02 2.9 8.6 61.2 9.4 0.9

Banking Sector Index 836 24.1 % 105.2 % 0.89 % 3.6 % 8.5 % 66.2 % 9.4 % 0.9 %

YTDi



Recent Transactions1

*Transactions with purchase price greater than $100 million.

Annual Bank and Specialty Finance M&A Transaction Volume and Deal Value2

664

551

684

619

714

607

723759

679

0

100

200

300

400

500

600

700

800

2008 2009 2010 2011 2012 2013 2014 2015 2016

Undisclosed <$100M $100-$250M $250-$500M $500-$1B >$1B

Recent Specialty Finance M&A TransactionsAnnounced

Date Acquiror Target Price Total Assets

Oct-16 Bohai Financial Investment Holding Co., Ltd. C2 Aviation Capital Inc. NA $11,100

Recent Bank M&A Transactions*

AnnouncedDate

Acquiror Target Price Price /Book

Dec-16 Simmons First National Corporation Southwest Bancorp, Inc. $567.7 200.0%

Dec-16 Veritex Holdings, Inc. Sovereign Bancshares, Inc. 176.0 187.5

Dec-16 Pacific Premier Bancorp, Inc. Heritage Oaks Bancorp 417.6 191.3

Dec-16 Southern National Bancorp of Virginia, Inc. Eastern Virginia Bankshares, Inc. 180.9 134.4

Nov-16 CenterState Banks, Inc. Gateway Financial Holdings of Florida, Inc. 142.5 163.6

Nov-16 Independent Bank Group, Inc. Carlile Bancshares, Inc. 494.0 150.0

Nov-16 First Interstate BancSystem, Inc. Cascade Bancorp 587.5 158.0

Oct-16 Access National Corporation Middleburg Financial Corporation 245.4 189.8

Oct-16 Community Bank System, Inc. Merchants Bancshares, Inc. 304.8 185.7

Oct-16 Enterprise Financial Services Corp Jefferson County Bancshares, Inc. 130.8 134.2

Oct-16 First Commonwealth Financial Corporation DCB Financial Corp 106.4 176.8



Appendix

*Individual companies not broken out due to sector size.

Public Comparables Analysis1

YTD Quarterly

Company (Ticker) Price

ChangePrice /Book

Return onAssets

Net InterestMargin

Return onEquity

Efficiency Ratio

TE /TA

NPA /TA

($ in Millions)

Banks (Assets <$1B) (518)*

Median 14.9 % 94.4 % 0.81 % 3.6 % 7.7 % 72.1 % 9.9 % 1.1 %Mean 20.0 % 98.0 % 0.77 % 3.7 % 7.3 % 74.3 % 10.3 % 1.4 %

Banks (Assets $1B-$10B) (254)*

Median 39.8 % 128.5 % 0.99 % 3.6 % 9.1 % 60.6 % 9.1 % 0.7 %0 0

Mean 39.3 % 133.4 % 0.93 % 3.6 % 8.8 % 61.3 % 9.3 % 1.0 %

Banks (Assets $10B-$50B) (43)International Bancshares Corporation 64.1 % 112.4 % 1.21 % 3.2 % 8.2 % 58.3 % 12.6 % 0.8 %Hilltop Holdings Inc. 58.6 119.9 1.68 3.7 11.6 78.5 12.8 0.3Sterling Bancorp 48.2 129.7 1.14 3.5 8.5 45.2 7.8 0.8Old National Bancorp 38.1 103.5 0.96 3.6 7.6 62.5 8.1 1.3Central Bancompany, Inc. 8.3 104.8 1.45 3.4 10.7 55.3 11.7 0.8First BanCorp. 107.2 64.1 0.79 4.2 5.4 60.0 14.6 9.3United Bankshares, Inc. 28.8 141.9 1.17 3.6 8.1 45.1 8.5 0.9Trustmark Corporation 57.5 121.4 0.95 3.5 8.1 66.4 9.0 0.9Cathay General Bancorp 26.3 135.4 1.39 3.4 10.4 45.7 10.3 1.1BancorpSouth, Inc. 33.8 126.6 1.05 3.5 8.8 68.0 9.9 0.7Western Alliance Bancorporation 38.7 212.4 1.59 4.5 14.6 42.5 9.3 0.9Washington Federal, Inc. 49.1 121.1 1.19 3.0 9.0 48.0 11.5 2.2Bank of Hawaii Corporation 43.5 266.6 1.09 2.8 15.0 56.3 7.1 0.4MB Financial, Inc. 51.6 129.9 1.03 3.7 7.7 64.2 8.2 0.6PrivateBancorp, Inc. 36.8 194.3 1.05 3.2 10.5 49.0 9.4 0.9F.N.B. Corporation 23.8 105.0 0.98 3.4 8.1 54.4 7.2 0.7Fulton Financial Corporation 48.3 118.1 0.92 3.2 7.8 65.2 8.8 1.0First National of Nebraska, Inc. 3.1 100.9 2.18 6.0 20.4 49.3 10.2 1.0Texas Capital Bancshares, Inc. 62.7 160.4 0.79 3.1 9.9 52.3 7.7 0.8UMB Financial Corporation 69.9 145.5 0.86 2.9 8.3 70.1 9.0 0.5First Hawaiian, Inc. NA 148.5 1.17 2.9 8.5 47.5 8.1 0.3IBERIABANK Corporation 55.8 108.8 0.94 3.6 7.2 60.3 9.5 NATCF Financial Corporation 41.3 114.3 1.07 4.4 9.7 68.1 10.7 1.7PacWest Bancorp 29.2 115.1 1.79 5.3 8.3 40.1 12.2 1.2Valley National Bancorp 21.8 115.4 0.78 3.1 7.6 62.6 7.1 0.6Prosperity Bancshares, Inc. 54.2 106.1 1.27 3.3 7.7 41.5 8.5 0.3Hancock Holding Company 73.1 101.1 0.81 3.2 7.6 61.3 7.9 1.4Wintrust Financial Corporation 53.5 118.6 0.85 3.3 8.0 64.6 8.7 0.6Umpqua Holdings Corporation 21.6 84.5 1.01 4.0 6.3 60.2 9.1 0.3BankUnited, Inc. 6.2 132.5 0.77 3.7 8.6 58.6 8.4 0.4Commerce Bancshares, Inc. 45.8 197.7 1.14 3.1 10.8 60.6 9.8 0.3Webster Financial Corporation 50.6 145.6 0.82 3.1 8.3 61.8 7.7 1.1First Horizon National Corporation 41.3 202.0 0.94 3.0 8.4 71.6 8.8 NAAssociated Banc-Corp 35.1 100.9 0.74 2.8 7.1 61.9 7.5 1.3Cullen/Frost Bankers, Inc. 52.4 149.9 1.11 3.5 10.2 56.5 8.6 0.3Synovus Financial Corp. 30.4 179.3 0.89 3.3 9.4 61.1 9.5 1.2First Citizens BancShares, Inc. 42.3 114.5 0.63 3.1 6.7 73.5 8.8 0.8BOK Financial Corporation 43.0 133.8 0.91 2.6 8.9 69.1 9.3 0.8East West Bancorp, Inc. 25.3 156.6 1.34 3.3 13.2 55.1 8.8 0.6Signature Bank 3.4 181.6 0.82 3.2 8.6 32.1 9.4 0.7Popular, Inc. 57.1 74.4 0.49 4.4 3.5 61.6 12.3 4.5People's United Financial, Inc. 22.8 101.2 0.73 2.8 6.1 61.6 7.2 0.8SVB Financial Group 47.3 160.2 1.02 2.8 12.5 54.1 8.6 0.3

Median 42.7 % 121.4 % 1.01 % 3.3 % 8.4 % 60.2 % 8.8 % 0.8 %0.0

Mean 41.7 % 133.9 % 1.06 % 3.5 % 9.1 % 57.7 % 9.3 % 1.1 %



Appendix

Public Comparables Analysis1

YTD Quarterly

Company (Ticker) Price

ChangePrice /Book

Return onAssets

Net InterestMargin

Return onEquity

Efficiency Ratio

TE /TA

NPA /TA

($ in Millions)

Banks (Assets >$50B) (21)First Republic Bank 43.3 % 246.4 % 1.03 % 3.2 % 10.6 % 54.7 % 9.0 % 0.1 %Zions Bancorporation 61.1 90.7 0.85 3.4 6.6 65.5 11.1 1.2Huntington Bancshares Incorporated 23.6 114.8 0.59 3.2 5.6 59.2 8.1 1.3Comerica Incorporated 64.4 153.2 0.82 2.6 8.5 60.2 9.9 NAKeyCorp 41.0 95.2 0.55 2.9 5.1 66.1 9.1 0.7Northern Trust Corporation 26.2 177.0 0.91 1.2 11.2 68.2 7.5 0.2M&T Bank Corporation 33.2 119.1 1.12 3.1 8.6 55.8 9.5 0.9Regions Financial Corporation 52.1 73.8 1.02 3.1 7.4 64.1 10.3 1.8Citizens Financial Group, Inc. 38.1 64.2 0.82 2.9 5.9 64.7 9.5 1.2Fifth Third Bancorp 38.0 100.1 1.46 2.9 12.2 54.9 10.2 1.2SunTrust Banks, Inc. 31.9 93.9 0.94 3.0 7.8 63.2 9.1 1.7BB&T Corporation 28.3 113.4 1.16 3.4 8.6 58.1 9.2 0.7State Street Corporation 19.3 141.6 0.97 1.1 10.2 71.0 5.8 0.0Capital One Financial Corporation 23.3 79.3 1.17 6.8 8.2 50.1 10.1 1.0PNC Financial Services Group, Inc. 25.5 135.7 1.09 2.7 9.0 61.4 10.5 NABank of New York Mellon Corporation 18.5 116.6 1.13 1.1 10.0 65.8 5.4 0.0U.S. Bancorp 23.8 173.0 1.38 3.0 12.5 53.7 8.6 0.9Citigroup Inc. 16.2 63.4 0.84 3.0 6.6 59.1 11.5 0.7Wells Fargo & Company 4.2 156.6 1.18 2.9 10.5 61.2 NA NABank of America Corporation 34.5 91.9 1.15 2.2 6.9 65.1 NA NAJPMorgan Chase & Co. 35.6 134.7 1.02 2.2 10.7 58.3 NA NA

Median 31.9 % 114.8 % 1.02 % 2.9 % 8.6 % 61.2 % 9.4 % 0.9 %0 0

Mean 32.5 % 120.7 % 1.01 % 2.8 % 8.7 % 61.0 % 9.1 % 0.9 %



Page 2:

1. “US Banks’ Profits Leave European Rivals in the Shade,” The Financial Times Ltd. January 15, 2017.

2. “Banking Regulatory Outlook 2017: Data Quality, Analytics, and Reporting,” Deloitte Center for Regulatory Strategy Americas. December 2016.

3. “Technology Will Help–And Hurt–Bank Results, Studies Say,” The Wall Street Journal. January 28, 2017.

4. “2017 Investment Management Trend Report: Indexing Still Trends Upwards,” Deloitte Center for Financial Services. December 2016.

5. “Janus to be Acquired by U.K. Fund Giant Henderson Group,” The Wall Street Journal. October 4, 2016.

6. “Simmons First National Corporation Announces Agreement to Acquire Southwest Bancorp, Inc.,” Globe Newswire. December 14, 2016.

Page 3:

1. U.S. Bureau of Economic Analysis. Accessed January 16, 2017. Data as of December 31, 2016.

2. U.S. Department of the Treasury. Accessed January 16, 2017. Data as of January 16, 2017.

3. SNL Financial. Accessed January 16, 2017. Data as of December 31, 2016.




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Sources Cited



Phil [email protected]+1 704 333 0533

Tracy [email protected]+1 213 996 4939

Eric [email protected]+1 704 333 0518

Tony Blanchard [email protected]+1 313 396 3738

Doug [email protected]+1 704 731 7219

Hector [email protected]+1 404 631 3015

John [email protected]+1 704 333 0574

Lorin [email protected]+1 704 333 0591

Will [email protected]+1 312 486 4458

Simon Gisby [email protected]+1 212 436 2495

Shingo [email protected]+1 212 653 3848

Jamie [email protected]+1 214 840 7057

Matt [email protected]+1 213 892 6053

James [email protected]+1 704 731 8230

Jonathan Ohm [email protected]+1 212 436 2287

Lou [email protected]+1 704 731 7202

Matt [email protected]+1 704 731 7186

Ron [email protected]+1 404 631 3710

Justin [email protected]+1 404 942 6960

Tom [email protected]+1 214 840 7014

Charlie [email protected]+1 704 731 7201

Brad [email protected]+1 704 333 0568

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